Gilberto Alfaro
Energy Partner
KPMG
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View from the Top

Vision for Making Green Development a Reality

Wed, 02/19/2014 - 17:09

Q: How important is the energy sector for KPMG’s activities, in Mexico and globally?

A: On a global basis, energy is one of our key strategic areas. Energy is going to be one of the main economic triggers, which will have many implications for cost, pricing and as an engine of social development. We have a specialized group worldwide that has key knowledge about the technologies and mechanisms of the energy sector and our operations in Mexico are aligned with that.

Q: How does KPMG perceive the Mexican market for renewable energies?

A: Mexico is in a very privileged position because it has a lot of renewable energy resources. However, the country is still facing a paradigm where oil is woven into the national fabric. Mexico does not seem to want to fully implement changes that would allow the country to draw the full benefits from its renewable energy resources.

Q: What are you doing to help your clients prepare for the impact of the Energy Reform on the Mexican energy sector?

A: Most of the challenges our clients face in Mexico are not just national, they have competitors from all over the world. These companies may be working in Mexico but their market is global. Industrial players are facing significant price competition, and being located in Mexico does not translate into being able to match the price of foreign products. It is also hard for companies to put an operation in place without focusing on efficiency and cost competitiveness. Technology, the cost of labor, security risks, taxes, permits and bureaucracy all hamper efficiency in Mexico.

Q: How has awareness about renewable energy evolved in recent years, and what are the drivers that will lead to Mexico becoming a green economy?

A: The renewable energy sector has been growing but not at the promised rate. This is mainly down to costs and a lack of incentives to promote the use of these technologies. The lack of infrastructure is another issue. The energy needs are there and CFE, due to the restrictions imposed on a government-owned entity, is not capable of providing all the energy required. There needs to be significant growth in this area. Certain companies are investing in wind projects but that also presents complications, since a wind farm requires significant investment and a company must have the capacity to switch to another type of energy when the wind is not blowing. Companies that are trying to make a business in this sector face severe restrictions.

Q: How can KPMG help build a financial model that can increase the confidence of financial institutions in bankrolling renewable energy projects?

A: We have a lot of experience in working with financial institutions. In our advisory area, we have specialists that help our clients to structure projects from a technical and financial perspective. We also help them to participate in governmental bidding processes.

Q: By 2027, 35% of Mexico’s electricity must come from clean energy sources. What would be the right incentives for the private sector for Mexico to reach this target?

A: The first step would be tax incentives, not only for the producer but also for the consumer. They have to be really clear incentives, especially for the consumers. For example, owning a solar heater could mean a tax reduction. We need a strategy for promoting the benefits that renewable energies can bring. If you do not link these benefits to general public awareness, nobody is going to implement renewable energy projects due to not being aware of the positive effects that can come from such ventures. We need more promotion of the benefits for both the producer and the consumer. Furthermore, we face natural restrictions with these types of energy because not all of them work in similar ways. We need to develop a particular strategy for each specific project, taking into account particular infrastructure needs. These are the strategies that need to be made clear to the public rather than making laws, rules, and programs.

Q: What role can KPMG play in supporting the further development of the Mexican energy sector?

A: Both our regional and global strategies reflect our strong commitment to the energy sector. We have an understanding of the local laws and regulations and can help our clients decide whether they wish to invest in Mexico. KPMG offers its clients a global network with standardized local services.